Tribe sues for revenue 'lost' during slot dispute

The San Pasqual Indian band finally got its slot machines. Now the tribe wants the money it believes it lost during the five years it fought for them in court.

The North County tribe, which owns Valley View Casino, yesterday filed a $115 million lawsuit against Gov. Arnold Schwarzenegger and the state, saying they breached the tribe’s compact, dealt in bad faith and interfered with its business.

“It’s our lost revenue,” lawyer Stephen Warren Solomon said. “We should have had those machines years ago.”

Late last year, Valley View Casino added 428 slot machines — for a total of 2,000 — after a judge’s order last summer in a lawsuit by another tribe forced the state to license more slots. That ruling was the culmination of a long-running dispute over how to interpret a complicated formula in dozens of deals the state struck with Indian tribes in 1999.

State officials said they will fight yesterday’s lawsuit. They note that the compact under which the tribe operates its casino doesn’t allow for monetary damages for breach-of-contract claims.

Officials also said they were acting in good faith, so it’s unlikely they would be ordered to pay damages.

Still, they said the case, filed in Los Angeles Superior Court, is different enough from other lawsuits from tribes over slot-machine licenses that there’s no clear precedent.

“This is a new issue, as far as we know,” said Jeff Macedo, a Schwarzenegger spokesman.

The dispute arose out of a provision in compacts signed by then-Gov. Gray Davis in 1999 that set a statewide limit on the total number of slot machines available to Indian tribes.

The state maintained that the number was about 32,000, and wouldn’t issue any more slot licenses after that number was reached unless tribes signed new compacts — which required them to make much bigger payments into state coffers.

San Pasqual and other tribes seeking additional slot machines claimed the actual number allowed under the 1999 deals was much higher — some argued as high as 105,000.

Last summer, a federal judge in Fresno hearing a lawsuit by the Colusa, a Central Valley tribe, ruled that the correct statewide limit was 42,700 and ordered the state to issue up to 10,549 additional licenses. The actual number of slot machines in California is much higher, more than 62,000, because not all tribes are covered by the 1999 compacts.

The state has appealed that decision — a 9th U.S. Circuit Court of Appeals panel heard arguments in San Francisco this week — but issued the additional licenses under court order.

San Pasqual quickly installed the new machines before Thanksgiving. Its casino is profitable, and it’s building a $72 million, 108-suite hotel.

The tribe’s $115 million claim is well below the $556 million it claimed with the state in June, before it got the additional machines.

At that point, it said the figure was based on how much money it lost from not having the machines from December 2008 through 2022, when the compact expires.

The lawsuit didn’t spell out how the tribe arrived at the $115 million claim, but said that’s the minimum it expects to prove at trial.

Between July and September last year, Valley View Casino had $43.7 million in gaming revenue, a 4.2 percent increase over the same period a year earlier, according to conversations casino officials had with financial analysts. The daily revenue from each of its 1,572 slot machines averaged $274.

That’s all before paying for supplies, salaries, debt and other expenses, which brought quarterly operating income to $10.6 million.

Also in October, the nearby Rincon Indian band got 400 new licenses, but it says the recession means additional machines for Harrah’s Rincon Casino & Resort will wait until later this year.

Rincon’s earlier litigation over slot licenses is instructive, said Scott Crowell, a lawyer for the tribe. Rincon lost in both federal and state courts when it tried to get judges to order the state to pay damages for a temporary casino it built, counting on licenses that the state later said were invalid.

In both of those cases, the state prevailed by pointing to language in the compact saying that lawsuits could only force it to comply with compact terms, not to pay monetary damages.

“It’s my belief San Pasqual’s current complaint will suffer the same fate,” Crowell said.

San Pasqual said in its lawsuit that the state doesn’t have immunity from breach-of-contract claims, despite whatever language is in the compact.

Despite getting the additional machines it sought as a result of the decision by the Fresno judge, San Pasqual still has a separate lawsuit pending in San Diego federal court over the number of slot machines, as does Rincon.

Judges in those cases are waiting to see what happens with the state’s appeals.

How many slot machines are available under the 1999 compacts is central to Schwarzenegger’s efforts to get tribes to renegotiate those deals and agree to pay a bigger share of casino proceeds into state coffers.

Some tribes, including Viejas, Pala and Pauma in San Diego County, agreed to new deals that called for bigger payments to the state in exchange for the ability to operate an unlimited number of slot machines.

Viejas and Pala both expanded as a result. But Pauma, which was unable to find a reliable business partner, has now sued to unwind the deal, saying it was tricked into signing it because of the state’s contention that additional slot licenses weren’t available.